Nvf Co. v. New Castle County, Civ.A. No. 00-577-RRM.
| Decision Date | 11 April 2002 |
| Docket Number | Civ.A. No. 00-577-RRM. |
| Parties | NVF COMPANY, Plaintiff, v. NEW CASTLE COUNTY Defendant. |
| Court | U.S. District Court — District of Delaware |
Robert W. Whetzel, Jeffrey L. Moyer, Thomas H. Kovach, Richards, Layton & Finger, Wilmington, DE, for plaintiff.
Wendy R. Danner, New Castle County Law Department, New Castle, DE, for defendant.
This adversary proceeding is a contract case in the context of a Chapter 11 bankruptcy. Plaintiff NVF Company is a Delaware corporation with its principal place of business in Yorklyn, Delaware. NVF is a debtor under Chapter 11 of the Bankruptcy Code. Defendant New Castle County is a county of the State of Delaware and provides sewer utility service to NVF.
On January 16, 1994, New Castle County filed a Proof of Claim against NVF for approximately $1,813,507.27 in unpaid sewer service fees from October 1991 to July 1993. After much delay and several continuances, on January 22, 1999, NVF filed an objection to New Castle County's Proof of Claim and its complaint against the County in this case. NVF alleges the County breached a 1970 agreement to make repairs to a sewer that was built by NVF but thereafter transferred to the County. NVF also alleges that the County violated a 1970 agreement and 1987 amendment to that agreement by refusing to acquire and operate a sewer pumping station on NVF's property. Finally, NVF alleges the County breached its duty of good faith and fair dealing by building another sewer pumping station in 1998 to avoid acquiring NVF's pumping station. NVF asserts that the damages from its breach of contract claims should act as a set-off to the County's claim for sewer service fees. On June 14, 2000, this court granted NVF's motion to withdraw the reference from the bankruptcy court.
Presently before the court are the County's motions for summary judgment. In its first motion, the County argues that NVF's claim for its repair costs under the 1970 agreement: (1) is barred by the doctrine of laches; (2) was waived when NVF undertook the repairs itself; (3) fails because NVF did not give notice to the County of breaks in the sewer line, purportedly an implied condition precedent of the contract; and (4) is not supported by sufficient evidence. With respect to NVF's claim that the County was required to acquire the on-site sewer pumping station, the County argues that NVF misreads the 1970 agreement. According to the County, its obligation to acquire the pumping station arose only when other sewer customers in Yorklyn were connected to the station. Because this condition precedent never occurred, the County reasons that NVF has no claim for breach of contract and that it is entitled to summary judgment.
In its second motion for summary judgment, the County argues that this court lacks subject matter jurisdiction over all of NVF's claims. It also contends that NVF's good faith and fair dealing claim fails for the same reasons the breach of contract claims fail. This is the court's ruling on the County's motions.
The following facts are taken from the affidavits, documents, and deposition testimony submitted by the parties.
NVF has operated a manufacturing facility in Yorklyn, Delaware since at least 1905. Until 1970, NVF disposed of wastewater and other industrial discharge into the Red Clay Creek, directly adjacent to NVF's facility. As environmental concerns mounted, NVF sought to dispose of its wastewater into the County sewer system. Because the County did not have sewer lines in the Yorklyn area, however, the parties entered an agreement in 1970 to build them.
The 1970 Sewer Construction Agreement provides that NVF shall build a pumping station, force main, and gravity line to interconnect its facilities with the existing sewer lines. Due to the topography, NVF had to build a pumping station on its property to pump its wastewater up the "force main," which used internal pressure to move the wastewater uphill. The force main attaches to the gravity line, which uses gravity to move the wastewater the remaining distance to the County's then-existing sewer lines. The entire sewer line is two and a half miles, with the pumping station and part of the force main on NVF property and the remaining force main and gravity line off-site. Pursuant to the 1970 Agreement, following NVF's construction of the sewer line, it conveyed the part of the sewer line not on its property, including all of the gravity line and much of the force main (the "off-site force main"), to the County, which was required to operate and maintain the off-site lines.
Central to the dispute are the provisions of the 1970 Agreement relating to the transfer of the pumping station and the portion of the force main on NVF's property (the "on-site force main") to the County. The opening provisions of the agreement state
WHEREAS, NVF proposes to pump the said sewage from Yorklyn to the vicinity of the Lancaster Pike, the pumping station being designed to accept future County sanitary sewers in Yorklyn; and
WHEREAS, the County is agreeable to said connection and proposes to take over the said pumping station and operate and maintain it as soon as County sewers are constructed in Yorklyn.
The Agreement goes on to require:
8. NVF shall convey to the County the pumping station, forcemain inside their property, together with the necessary rights of access upon request of the County with the understanding that the County does not intend to request this conveyance until it builds sanitary sewers in Yorklyn serving other customers. NVF shall not be required to accept any sewage from others into the system until the County takes over the pumping station and forcemain.
To allow for these later connections, the pumping station was required to have a capacity of at least 560,000 gallons per day, with 525,000 of those gallons reserved for NVF's use. The Agreement also states that "if the pumping station or forcemain are abandoned by the County, they will revert to NVF." Pursuant to the 1970 Agreement, NVF was required to pay service charges set by the County for use of the sewer lines.
The pumping station, force main, and gravity sewer were built by NVF in 1970 and 1971. Upon completion, NVF conveyed the gravity sewer and off-site portion of the force main to the County. Although there were no reported problems with the gravity sewer, the force main began to experience breaks shortly after its completion. According to William Witt, a retired NVF employee, the force main was built from polyvinyl chloride plastic, or PVC. In fact, the force main was the first sewer line in the County that used PVC. Witt testified that the heat of NVF's wastewater weakened the force main and cause it to break under pressure. These breaks caused NVF to shut down its operations until the break was fixed. For the first few breaks, the County was called to make repairs to the force main, but the County's response time was too slow for NVF. Witt believed the County was unfamiliar with repairing PVC force mains, and he reported that the slow pace of its repairs would require NVF to shut down for several days. After six months of breaks, it became apparent to Witt and other NVF employees that the County would not respond more quickly and NVF began making its own repairs with the assistance of a contractor. NVF kept PVC piping and fittings in stock to make the repairs when necessary. NVF continued to make repairs to the force main, both on-site and off-site, from 1971 until August 1987, at a cost of $84,129. In August 1987, the County resumed making repairs to the off-site force main.
In 1986, NVF determined that it would cease using a private treatment facility to clean wastewater for disposal into the Red Clay Creek. As a result, it sought to increase its sewer discharge from 525,000 gallons per day to one million gallons per day. Around the same time, a developer of residential property in Yorklyn, Daniel Lickle, sought to have the county lay sewer lines for his proposed neighborhood across the Red Clay Creek from the NVF facility. The County considered permitting the developer to connect a sewer to the NVF pumping station, but County employees expressed some reservations about assuming responsibility for the NVF pumping station under the 1970 Agreement.
On July 17, 1987, NVF and the County entered an agreement that amended the 1970 Agreement to increase NVF's sewer discharge to 1 million gallons per day in return for a fee of $45,220 to the County.1 The 1987 Amendment incorporated the terms of the 1970 Agreement, but states that if any terms or conditions of the two contracts conflict, the 1987 Amendment prevails. Under the 1987 Amendment, NVF was responsible for equalizing the flow of sewage so as not to exceed one million gallons per day. Paragraph 3 of the 1987 Amendment stated that "[A]ll facilities and modifications necessary to equalize flows in order to meet the above discharge conditions shall be the sole responsibility of NVF and shall be subject to approval by the County." Once again, the 1987 agreement addressed connecting other sewer customers to its pumping station.
NVF will allow other County customers to discharge via facilities located on and owned and operated by NVF, a total daily flow not to exceed 35,000 gallons.
The daily flow from County customers allowed by NVF shall be considered part of the total daily flow discharged from the NVF force main to the County sewer service for purposes of the above-stated 1,000,000 gallons per day restrictions.
All such connections to the NVF system shall be as approved by NVF and shall be at no cost to NVF. Sewer billings shall be adjusted to reflect the presence of any such non-NVF flows which pass through the NVF meter.
The 1987 Amendment reserved 965,000 gallons per day to NVF for its use. To equalize flows...
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